July 2016 Stock Considerations

With the month of June quickly wrapping up on a very volatile note, it looks like better buying opportunities lay ahead in the coming month with a lot of uncertainty and no precedent to guide us through the formal leaving of Great Britain from the European Union. Clearly, the worldwide stock markets do not like all this uncertainty and the price action has been reflecting this. Without rehashing the reasoning the British vote went the way it did, one thing is clear… volatility will present us with better buying opportunities than in recent months past, as price, value and yield will start to look more compelling. Putting things into perspective though, the market was a lot uglier in January and February of this year than what we saw after the big decline last week. While Friday was a shock to the system, from a longer term perspective we are not much lower than about a month ago. With that being said, it’s time, once again, for me to lay out some of the potential stock picks I am considering for the month of July.

 

It’s been a few months since I considered the large Canadian banks for a monthly buy, but in July they are starting to look more attractive as dropping prices have brought up yields and better values. As before I am considering, once again, The Bank of Nova Scotia (BNS), The Toronto-Dominion Bank (TD) and Royal Bank of Canada (RY). All three of these banks are offering up yields north of 4%.

 

In the same financial vein, I am also considering an American bank that has been quite popular among the DGI community as of late, Wells Fargo & Company (WFC). It’s no surprise that the financial sector took a serious blow last week because of the Brexit fallout and WFC among other names are selling at much better prices and yield. Other names I’m considering include, W.W. Grainger, Inc. (GWW), V.F. Corporation (VFC) and Abbott Laboratories (ABT). These were the same names I considered last month and I ended up pulling the trigger on AbbVie Inc. (ABBV) instead. As you can see below, all the companies mentioned offer decent yield and all have low to moderate payout ratios ensuring safe dividends that even have room to grow based on current cash flow.

 

 

What do you think about my potential stock picks for July? Are any of the above names on your monthly watch list? Is the Brexit panic keeping you on the sidelines or are you jumping in the market? Please let me know below and I welcome any suggestions too.

 

Disclosure: Long BNS, TD, RY, WFC, VFC, GWW, ABT, ABBV

28 thoughts on “July 2016 Stock Considerations

  1. Divhut, thanks for sharing. I agree with you that the drop on Friday is minor compared with January and even with the numbers we saw last month.
    I have a similar watch list of companies. I think the volatility will probably last a little while so we have some time to pick our opportunities.
    D4s

    • Hi D4s,

      It will be interesting to see how the market unfolds in the coming weeks as the Brexit news seems to be the biggest financial happening to occur in many years. No doubt, volatility will be with us throughout the summer and I’m sure new buying opportunities will be presenting themselves. Of course, this is what we all have been waiting for all these months. Thank you for stopping by and commenting.

  2. Brexit doesn’t bother me one bit. The only thing that I am positive about in life is that things change. That being the case, our portfolios should be ready for it when it happens. I’ve got my eye currently on Boeing (BA). Thinking I may get a steal of a deal on it very soon. Thanks for posting!
    Dividend Reaper recently posted…Brexit DealsMy Profile

    • Hi DR,

      You are correct in saying that change is a part of life. We must always adjust, adapt and change our lives as the situation permits. That being said, BA and other defense stocks look interesting at this time. I have RTN and LMT on my watch list but not in any of my portfolios yet. We’ll see how July unfolds but it looks like we’ll be seeing better buying opportunities in the weeks ahead. Thank you for sharing your next buy consideration.

    • Hi Stefan,

      I have been a fan of the Canadian banks for a while. While a weaker Canadian dollar and low oil prices brought the entire sector down, along with Brexit now, we are presented with financial companies paying us a generous and safe dividend yield. Like you, I’ll consider nibbling a bit more north of the border. Thank you for commenting.

  3. I’ll buy some of the names above as you and I had some of the similar name prior to my selling off to raise money for my out-of-state rental.

    I’d be a little more patience and the news started to trickling in about the damages. Some of the anger to drove the “brexit” movement was on immigration issues. There could be talk to reverse the decision if the government promise to do something about the immigrants issue?!?! We never know, but it looks like the DOW might break the 15000 mark again like August 2015 and Feb 2016.

    I have 10% of cash to work with, not much, but I don’t want to miss the buying opportunity, yet don’t want to pull the trigger too early 🙂 decision, decision. If it bounce back, it bounces very quickly. I’m super selective as I would like my dividend growth account back LOL 🙂

    • Hi vivianne,

      The reality is that no one knows what the future will bring. Just as everyone got the Brexit vote wrong, as evidenced by the world markets on Thursday rising and then falling on Friday, who knows what future news bite will drive the markets higher or lower. We may very well see DOW 15K again or a “surprise” new vote may bring us back to 18K. Either way, I’ll continue to nibble on stocks that sport decent yield and more importantly a safe yield. After all, what good is any yield if it cannot be sustained. As you stated, “decisions, decisions.” It’s impossible to time and buy at the “perfect” time so sometimes just pulling the trigger on something is better than not doing anything and perpetually waiting. As always, I appreciate your comment.

  4. Hi,

    I know only GWW, VFC, ABT, ABBV. In my opinion:
    – GWW (you commented my post) – I still think it is not cheap company (though there are some pros, for example big repurchase program), anyway, look at oil – if oil is to revert I see some risk for GWW (lower demand from oil & gas industry)
    – VFC – very expensive in my opinion, why exactly would you like to buy VFC? If consumers are to be more reluctant then demand should be lower…
    – ABT – it is getting interesting, just few more dollars down and I will buy it 🙂 I think that acquisition should be value accretive, deffinitely on my watchlist
    – ABBV – similar story, shares are getting close to my investable level

    best regards,
    DividendTIME
    DividendTIME recently posted…AbbVie – how is business going?My Profile

    • Hi DT,

      I appreciate your insight into each of my considerations for July. Looks like ABT and/or ABBV are the names to consider in the near term but VFC is such a quality name that has not been on “sale” in a long, long time. The real pressure for VFC has come from a high U.S. dollar and GWW looks like a good proxy for North American business activity which may be waning. Thank you for sharing your thoughts.

  5. WFC is taking a walloping with the whole Brexit situation. Could be a good entry point if you can stomach the short term turmoil. I have enough banks thought that I am not rushing into that sector anytime soon (at least international banks that is). GWW, ABT, or any of the Canadian banks also seem like good choices as well. As long as you shop smartly, you can’t go wrong heading down the discount aisle. Keep us updated with that you select!

    Bert
    Dividend Diplomats recently posted…Industry Analysis: Grocery Store StocksMy Profile

    • Hi DD,

      Well, compared to just a few short days ago, everything is selling at much better pricing with the financial, energy, materials and industrial stocks getting hit the hardest. It’s been a while since I considered the Canadian banks let alone WFC but at these prices they are becoming more and more compelling. I still have another trade to do before June is up but my June and July selections are pretty much the same barring some new leg down in pricing that may come out of left field. As always, I appreciate your comment.

  6. I wish I had a lot of money to invest. When the market goes down, in my opinion, it presents a long-term buying opportunity. I do know that a lot of people who depend on their income now are hurting because of the decline in the stock market. But, for those of us who has time on our side, I think the decline in market prices is not necessarily a bad thing as we can get in the market at cheaper prices. So, for me, I’m jumping in the market with the very little money that I have.

    • Hi DL,

      Everyone feels that way when the market tumbles. They all wish for a huge pile of cash to deploy. The bottom line for anyone in the accumulation phase of their investing cycle is to want lower prices as more shares can be bought at higher yield. I think it’s also important for people to not get scared out of the market during these times as often you find people sell at the worst possible times and wait too long to get back in the game. My main goal is continued dividend appreciation on a year over year basis rather than simply capital appreciation. This can only be done by staying invested. Thank you for stopping by and commenting.

    • Hi HHaWG,

      Looks like we have the same names in mind going into July. WFC has seen a lot of buys among our fellow bloggers in recent weeks and with the Brexit fallout the financial stocks are looking even more attractive. ABT is another popular name in recent days too as its price has slid quite a bit in the last year and is now trading at around the 52 week low. With a safe yield it may be time to nibble there. Thank you for sharing your thoughts.

  7. Those sound like pretty interesting ideas ( I am not saying that, simple because I also have a position in all of them)

    I would be interested in VFC and GWW, but unfortunately I have little cash to deploy. Most of my new money is going in my 401 (k).

    I think that WFC is a very well run bank. This is why Buffett holds so much there ( through BRK.B) However, the recent small dividend hike, and the flat revenues over the past 5 – 6 years make me a little hesitant to pull the trigger and add to it.
    Dividend Growth Investor recently posted…Medtronic: High Dividend Growth StockMy Profile

    • Hi DGI,

      It’s all good as long as your money is going towards some investment in your future… 401(k), dividend stocks, real estate, etc. A lot of these names I’m considering in July are still trading at relatively high values but my need to spread my fresh money around beyond the Canadian banks calls me (even though BNS is starting to look a lot more enticing). I understand your near term concern about WFC even though long term it has been a great performer even during some pretty tough times. It will be interesting to see how July shapes up as Brexit news wanes. Thank you for commenting.

  8. DivHut,

    What about investing in Canadian Insurance companies like Manlife, Sunlife. Manulife offers over 4% dividend and is right now relatively cheap.

    • Hi dipu,

      Thanks for sharing some of those Canadian insurance companies. To be honest, I never looked into them before but have seen quite a few other bloggers hold some of these names in their own portfolios. My only insurance holdings are CB and AFL with TRV on my watch list along with ORI. Perhaps I should take a look at the names you mentioned. Thank you for stopping by and sharing your thoughts.

    • Hi DR,

      Thanks for sharing your new position in WFC. Happy to be a fellow shareholder with you. I have owned WFC since 2007 and have been happy with it even with the dividend cut during the financial crisis of 2008/09. Thanks for sharing.

  9. I could not help to pull the trigger on 15 shares of each WFC and BNS. I did not own either one but just wanted to start a small position. If they drop more I will consider adding. Love reading your guys posts.
    Thanks
    Wayne

    • Hi Wayne,

      Thank you for your kind words about my blog posts. I think long term you should do just fine with those two names you picked up. I have held WFC since 2007 and about a couple years ago started buying into the Canadian banks. No doubt, the Canadian banks are facing near term headwinds with lower oil prices (compared to 2014) and a weaker home currency. That being said, they seem very resilient and have the cash to continue paying and increasing those dividends. BNS is probably a little riskier when compared to TD or RY simply because of its foreign exposure but still a solid dividend payer. Thank you for sharing your thoughts.

    • Hi DDD,

      My June and July lists are pretty much the same as I want to start looking at other names besides the Canadian banks. I have looked into adding to my UL, DEO and even IR after the whole Brexit mess but they haven’t really gone down as much as I had hoped. It really has been a serious roller coaster ride the last few trading days. Who would have thought that summer sessions could be so volatile. As always, I appreciate your comment.

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